If you`re in the market for a mortgage, you may have come across the term “Fannie Mae occupancy agreement.” But what exactly does it mean, and how does it affect you as a borrower? In this article, we`ll dive into the details of the Fannie Mae occupancy agreement and what you need to know about it.

First, let`s define what Fannie Mae is. Fannie Mae, or the Federal National Mortgage Association, is a government-sponsored enterprise that buys and securitizes mortgages. Essentially, Fannie Mae provides liquidity to the mortgage market by allowing lenders to sell their loans to Fannie Mae, freeing up capital for the lenders to make more loans.

So, what is a Fannie Mae occupancy agreement? Simply put, it`s an agreement between the borrower and the lender that establishes the borrower`s intent to occupy the property as their primary residence. This agreement is typically required for certain types of loans, such as conventional loans backed by Fannie Mae.

Why is an occupancy agreement necessary? For one, it helps prevent fraud. If borrowers falsely claim that they`ll be living in the property when they actually plan to use it as a vacation home or investment property, they could be committing mortgage fraud. Additionally, lenders want to ensure that borrowers are financially stable enough to handle the mortgage payments, which is more likely if they`re living in the property and not trying to generate rental income.

So, what does the Fannie Mae occupancy agreement entail? Generally, it states that the borrower will occupy the property as their primary residence within 60 days of closing and will continue to live there for at least one year. The borrower also agrees to notify the lender if their occupancy status changes and to provide documentation if requested.

If the borrower fails to comply with the occupancy agreement, the lender could demand immediate repayment of the loan or pursue legal action. However, there are circumstances in which the borrower can be released from the agreement without penalty, such as if they need to relocate for a job or if their primary residence becomes uninhabitable.

In conclusion, a Fannie Mae occupancy agreement is a contractual agreement between the borrower and lender that establishes the borrower`s intent to occupy the property as their primary residence. It helps prevent fraud and ensures that borrowers are financially stable enough to handle the mortgage payments. As a borrower, it`s important to understand the terms of the occupancy agreement and to comply with them to avoid any potential penalties.